Portfolio Review for April 2021

 

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For my previous portfolio review click here

YTD(2021) I have made a total profit of S$59,166.04 from my equity investments(predominantly in HK) with an XIRR of 107%(XIRR is annualized). From my 6 years of tracking, I have made a total of S$158,808.70 from this portfolio alone.

In terms of benchmarking with STI, HKSE and World index. There is a gradual improvement in my performance this month as 10 years treasury rate stabilizes. 

Portfolio composition(3 index etfs and 27 stocks):

Transactions:

Added more GDS(HK:9698) to 4.7%

Added more Xinyi Energy(HK:3868) to 2.96%

Added more ZA Online(HK:6060) to 2.95%

Added more C-MER(HK:3309) to 4.27%

Initiated a 1.22% position in Coinbase(US:COIN)

Sold Vanguard S&P 500 ETF(HK:3140) for 65% gain

Commentary: 

I continue my strategy of buying the dip of higher conviction stocks in segments like specialized healthcare, Saas, Insurtech, Greentech. After China's antitrust fine on Alibaba, the worst seem to be over for the tech giant. The Chinese government may now continue to assert pressure on Tencent and Meituan next. Antitrust is a global function and is needed to improve corporate governance and competition. 

Alibaba(HK:9988): Alibaba only gotten a 4% of revenue fine which is 2.8bil usd(max antitrust fine is 10% of revenue). Last quarter they made a profit of 12bil usd. So if this fine is the last of it, its actually a good news, better than what the market was expecting. More importantly its a non impact to the company. This 2.8mil usd fine is worth to pay because in exchange they get to access Wechat and force integration of their Alipay in Wechat ecosystem. 

Another problem Alibaba now faces is Bytedance. It is scaling up its ecommerce arm via Douyin and Tiktok rapidly to compete with the incumbent. Also decentralized competitors like China Youzan and Weimob are growing rapidly to eat into Baba's market share.  

Vanguard S&P 500 ETF(3140): Vanguard is leaving HKSE completely and is planning to delist all their etfs on HKSE. I am forced to sell all my S&P500 holding for a 65% gain. S&P 500 PE has reached 42.5x which is near the peak of the dot com bubble. It is maybe ideal to take profit and stay at the side lines for now.

Coinbase(US:COIN): Coinbase was recently direct listed on the Nasdaq. To me its a shovel for crypto. During the gold rush, those that sold shovels made the most money. Coinbase is not only a pure crypto exchange, but to me it is also a casino, a coin storage and a highly compliant brokerage. Yes there is some correlation to Bitcoin, but as long as there are volatility and transactions, they will make money.

Valuation wise, Coinbase is either extremely mispriced by the market or its currently at its peak revenue. I feel it is the formal. Cryptocurrency is still at its infancy, that is why Coinbase is experiencing such a massive growth in terms of topline, profit, retailer and institutional numbers and MAU. Coinbase top line has increased by more than 100% from 2019 to 2020 with a profit margin of more than 40%. Its 1st quarter 2021 revenue was 1.8bil which is more than their FY 2020 revenue of 1.14bil! That is some insane growth. Assuming 1Q revenue stays consistent throughout the year, price to sale ratio will be around 9x at 65bil market cap. That means a 9x p/s ratio for a company that has revenue growing at more than 400%.

Some cons are also quite evident. Coinbase high commission fees will go down overtime due to competition which will likely cause margin erosion. There is a need to watch how the company diversify its business to a more subscriptive one and be less reliant on transactions. The amount of institutional growth in the company is promising. Custody storage charges may play an important role in the future as they grow. More innovation is needed to dabble into disruptive technology like Defi. 

I added a small amount at 320 and will continue to add if the price becomes more attractive. 

My Thoughts on Glendale Park and Property Talk

 

The recent Rail Corridor news has brought some interest to Hillview because its one of the access point. From Hillview MRT Station, you can walk a short distance to the Rail Mall, which is a small stretch of shops. From there, you can walk up a dirt path to a bridge along the Rail Corridor.

This might mean increase foot traffic to Rail Mall which is owned by SPH and Hillv2 mall(Far East Organisation). Which in turn might increase the vibrancy of this part of Singapore which is usually quiet and serene.

My unit at Glendale continues to be rented out with gradual rent step up. The demand is still prevalent. According to URA data. OCR has the lowest vacancy rate of 5.1% compared to RCR(7.3%) and OCR(11%). On a macro level residential property has an average vacancy rate of 7% compared to Office space at 11.8% and Retail space at 8.8%. This means residential space is a safer haven because people that live and work in Singapore needs a place to stay that is a basic necessity. The reason OCR has the lowest vacancy, is because there is a trend of decentralization for office space and now residential space. moving away from central to outskirt is more cost effective for tenants.

Price appreciation wise, if I use all the psf transactions done in 2021 and average them, I get 1,288.5psf. This means there is a 12.33% capital appreciation from my purchase price since 2019. This might not be totally accurate as there are only 4 transactions and the floor level and interior renovation might cause small discrepancy. But its a good gauge.

Singapore property index has been consolidating for 8 years since 2013. The demand is increasing due to low interest rates. Government has implemented 10 cooling measures to cool the market so far. This means private property owners here are long term holders and not speculative because tdsr, absd, seller stamp duty and ltv removes speculation and pump and dump motives completely. This is good because it makes the property prices here more stable, less likely for owners to force sell. Also gives move levers for government to control the market if there is a sharp correction. 

There is now a large price gap between new 99 years launches and old freehold condominiums. This is irrational and I believe this price anomaly should be closed over time. 99 years land no matter how new, cannot compare with freehold which is immune to the bala curve. Condominium is a global asset ie its the only asset in Singapore where Singaporeans and foreigners can buy freely. The recent news on Eden by Swire which sold the whole development to a Chinese at above 4.8k psf and UHNWs buying properties here in Singapore tell us that the demand from foreigners despite the 20% absd is strong. See how it goes.

My Thoughts on XD Part 4 (XIRR Update)

 

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On April 1st, Bilibili(HK:9626) announced the strategic investment of approximately HK$960 million in Xindong Company in the second week of its secondary listing in Hong Kong. The two parties will establish a cooperative relationship in the game field.

According to the agreement, Bilibili will subscribe for 22,660,000 ordinary shares issued by Xindong Company at a price of HK$42.38 per share, with a total subscription price of approximately HK$960 million. After the transaction is completed, Bilibili will hold approximately 4.72% of Xindong's equity. At today's close, Xindong's share price rose 22.34% to 57.5 Hong Kong dollars.

XD now has ByteDance, Mihayou, Lilith, Bilibili, Alibaba as strategic shareholders, except Tencent and NetEase. This means that the up and coming mobile gaming companies are trying to use TapTap platform ecology to subvert the top two gaming giants in China?

The core of the cooperation between Bilibili and Xindong Company lies in the complementary advantages of both parties. The good two-dimensional atmosphere of Bilibili is the main reason for the growth of its two-dimensional game track, and Xindong's unique TapTap game community model which consist of channels, R&D, and game ecology can all benefit the game business of Bilibili. The TapTap game sharing community is known as the "Douban" of the game industry. Unlike the traditional channel intermodal sharing model, TapTap has become a unique channel for the domestic Android market due to its zero-sharing model, attracting many game developers to cooperate with it.

Xindong is a game company focusing on the two core businesses of game development and distribution and TapTap game community information services. Xindong Company announced today that it will issue a total of US$280 million in 5-year convertible bonds, and at the same time carry out an allotment of approximately HK$1.115 billion (approximately US$140 million) of new shares, raising a total of approximately US$420 million. It seems like Huang Yimeng is trying to expand the company aggressively and even letting its competitor(Bilibili) invest to form strategic win win partnership. This kind of fund raising and R&D push is similar to how Meituan rose from ambiguity. 

The company’s placement shares include two companies, Bilibili and Taobao China. After the placement is completed, Bilibili will subscribe for 22.66 million shares, involving an investment of 960 million Hong Kong dollars, and holding 4.72% of the shares. Taobao China will subscribe for 3.658 million shares, involving capital. 155 million Hong Kong dollars, holding 0.76% of the shares.

Taobao's small stake is a bit puzzling. Maybe Alibaba is trying to find new ways to subvert Tencent strong gaming lead via Tap Tap platform ecology. Taobao has a massive platform ecology too via their ecommerce app, although its of a different segment, a synergistic MAU exchange potential might happen in the future? Have to wait and see.

Xindong Company has well-known game IPs such as "Ragnarok Ro" and "Sausage Party", and its cartoon game style is consistent with the strategy of Bilibili to develop two-dimensional games. In addition, the core asset of Xindong Company is the TapTap community, which is also the most attractive place for Bilibili. The similarity of user operation concepts and the complementarity of game distribution channels between the two parties have promoted the completion of this cooperation.

Although the game business has always seen some explosive products in the industry, with the passage of time, the market share is still in the hands of Tencent and NetEase. However, diversified companies are subject to business limitations and need to expand emerging user groups to promote corporate growth. And the high degree of overlap between the young user groups at the core of Bilibili and the game groups may have new opportunities.

The TapTap model, which is different from the traditional application store channels, is increasingly favored by institutions. At a time when traffic costs are becoming increasingly high, the scarcity value of Xindong, which has a variety of new game tests and has a zero-share game platform TapTap, is more preferred.

Xindong's self-developed games have strong internal growth momentum. At the same time, TapTap, as a scarce mobile game distribution platform, has a high valuation premium basis. It should be noted that Xindong has soared by 144% from the beginning of this year to the peak of February 16, and its share price soared to 114.5 Hong Kong dollars. After that, it fell all the way down and even cut in half. I believe strong conviction is needed to fully realize its potential.

The attraction of the well-known game IPs of Xindong Company to Bilibili also reveals to a certain extent that Bilibili is aiming to reduce the overall proportion of games in the company's revenue. I think more patience is needed to see how XD especially its core Tap Tap platform can evolve over time.

Full disclosure, I have vested interest in this stock and I'm currently up 60.52%

Snap shot of my portfolio performance as of today: Total profit for 2021: S$53,869.30